Another $1 million for Arthur Nadel's victims

"False profits" to be returned in settlements between receiver and two Virginia investment funds.

By JOHN HIELSCHER

Another $1 million has been added to the pot of money that will be split by investors who were torched in the Arthur Nadel Ponzi scheme.

Two investment funds from Virginia have settled lawsuits to turn over the "false profits" they received from two of the Nadel-managed hedge funds.

It represents the third-largest clawback among more than 100 settlements topping $15 million that have been reached by court-appointed receiver Burton Wiand.

The Tampa attorney has been going after "profiteers," those investors who took out more money than they invested in the six hedge funds operated in Sarasota by Nadel and partners Neil and Christopher Moody.

A total of 475 investors have filed claims for a share of the receivership funds, along with 21 creditors of Nadel's businesses.

Nadel is serving a 14-year prison term for the Ponzi scheme that cost investors $162 million.

Wiand filed suits in January 2010 against the James River Diversified Fund LP, the James River Multi-Strategy Fund LP and chief executive Paul Saunders of Manakin-Sabot, Va.

The suits, later amended, claimed James River Diversified invested $1.5 million in 2003 in the Valhalla Fund, one of the hedge funds Nadel managed for the Moodys. James River removed $2.05 million in 2005, reaping false profits of $555,261.

James River Multi-Strategy invested $3 million in Nadel's Victory Fund in 2003. Four months later, it withdrew that money plus $158,274 in profits, which it will turn over.

Saunders, described as an investment professional, invested $5 million in Victory in 2003. Within six months he had removed the principal plus $356,630 in profits, which Wiand sued to recover.

A federal judge approved the settlements last week. Saunders and the funds have 10 days to pay the $1.07 million.

Only two false-profit settlements have been larger, according to Wiand's office.

William J. and R. Jean Beard of Indiana settled a lawsuit for $1.3 million. David Quade agreed to turn over $1.1 million without being sued.